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- December 13, 2024
Top Accounting Challenges in the Hotel Industry and How to Overcome Them
We work with a lot of hotel clients as their accounting and taxation experts.
During our work experience with them, we have noticed some basic pitfalls these businesses face. Our clients often come up to us with these most common accounting challenges.
After consulting with 25+ hotel businesses, we concluded that these challenges could severely impact their routine business operations. So, we decided to come up with a detailed blog that offers pretty good insights into these challenges. We have also added some basic tips that can help hotel businesses tackle these problems.
So let’s get started.
Challenge #1: Troubles Managing Daily Sales
No hotel operates from 9 to 5. So it’s a challenge to track the daily sales for them. Moreover, there is no single stream of income. Income sources vary widely and might include room bookings, catering, food, event spaces, spat treatment, and more. The sheer volume and diversity in transactions make sales tracking a big challenge.
This becomes exhaustive, especially during the audits. It’s vital to record every small and big transaction accurately for audit. The time and effort needed for this pose a challenge. On top of that, there is always a risk of human error when recording such small transactions.
And once the audit is complete, accountants have to sift through hundreds of records for reconciliation and approval. This practice is time-consuming and inefficient.
Pro Tip: Hotels can try a customized PMS or Property Management System. These tools can help hoteliers avoid issues with their daily sales. An even better option is to hire a team of accounting and Tax experts like CROWNGLOBE has. They have their own custom software that can integrate with your existing systems and take the load of sales management off your shoulders.
Challenge #2: Tax Penalty Surprises
Hoteliers pay a lot of attention to their customers. But if they would pay a fraction of that attention to their books of accounts, that would be way better! We understand it’s a bit mundane task. But when it’s not done accurately, taxation blues are common in the tax season.
Hotels have to maintain every inward and outward transaction. If they miss a single one, they face problems with payables and receivables. Moreover, creating and mapping entries to the right chart of accounts is also a problem for many hoteliers.
Pro Tip: The only way out of this trouble is to hire a professional taxation agency. Only these experts can help you prevent any tax surprises. The other option is to hire an in-house taxation expert. But this might cost you more, and you won’t get access to the best talent pool in the market.
Challenge #3: Minor Revenue Leaks
Another major issue for hoteliers is minor revenue leaks. These leaks are almost invisible when you look at them as a standalone leak. But when they pile up over the year, they become a massive chunk of your annual revenue that you lost. It could be anything like overpaying the vendor, underbilling the customer, or even mismanaging refunds. Sometimes, vendor bills get lost in a poor accounting system. Result? You end up paying an additional amount in terms of late fees.
Sometimes, your in-house accountants fail to bill your guests for their room upgrades or late checkouts. These might feel like little losses, but when they pile up, they become a lot of revenue loss. Such smaller revenue leaks are quite difficult to find without professional help.
Pro Tip: Conduct regular internal audits. These audits can help you manage your payables and receivables accurately. Once you get them in order, you can plug a lot of revenue leaks. So it’s a good starter.
Challenge #4: Troubles with Multiple Bank Accounts
Almost every hotel has multiple bank accounts. Result? There is a stronger chance of accounting errors, mismatches in entries, and messy reconciliation. And if the hotel has multiple locations, the problem becomes a lot more complex. Hoteliers have to compare their records with the bank statements daily. This is not an easy task. It’s boring, cumbersome, and error-prone.
The troubles mount for hotels when a large number of such transactions enter their bank statements. Result? A hotel will not have accurate financial data. Without such data, managing cash flow across multiple properties is a headache.
Pro Tip: Make sure you are reconciling your accounts regularly. You can also get help from a reliable accounting and bookkeeping agency. They have a team of bookkeeping experts who can do all the reconciliation and account management tasks.
Challenge # 5: Issues with Payroll Management
Employees work in shifts, their roles are different, and the mode of employment is different, too. Now, this makes payroll management a real challenge. For example, some employees work full-time while others work part-time. Some are contract workers, while some are seasonal ones. On top of that, the HR and accounting teams have worked together for their accurate wage calculation. For example, the final calculation will have work-hour wages, tips, bonuses, and more.
Then, there is a problem of staying compliant with labor laws, overtime calculations, and tax withholding. The hotel’s in-house accountant makes a few errors, and the results could be catastrophic for the business. For example, any underpayment or inaccurate tax deductions can land them in legal trouble.
Pro Tip: You can use specialized payroll management tools to eliminate any issues with your payroll. There are quite a lot of them available in the market. These payroll management tools can prevent minor errors and save your resources.
Make the Right Choice
We understand running a successful hotel or hotel chain is a bit challenging. But you cannot ignore your accounting and taxation. Because if you do, no matter how satisfied your customers are, you might struggle to make money.
And no business wants that, right? So, always consult the best accounting firm, such as CROWNGLOBE, for professional guidance. We handle accounting and taxation for multiple hotel businesses. So we understand this business inside out. We know what works here and what doesn’t.
So, if you feel stuck somewhere, we are here to help. Feel free to reach out.
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